A Project report

On

Study of Marketing Mix and buying behaviour

Of

Uflex Limited, a leader in Flexible Packaging Industry

Submitted By (Group 5): Submitted to:

Prateek Sharma (09bshyd1024) Prof. M.J. Menon

Vishal Mehra (09bshyd0982) (B2B – B, IBS Hyderabad)

Karan Kapoor (09bshyd0356)

Amit Gangwar (09bshyd0073)

Divya Vasudev (09bshyd1103)

Abhinav Garg (09bshyd0017)

Date of Submission:

23rd August, 2010

OVERVIEW OF PACKAGING INDUSTRY

All major industries create wealth but Packaging Industry is one industry that plays a unique role by way of both creation of wealth through a wide range of manufacturing activities and also by way of preserving the wealth or value created by many, many other industries.

Packaging in India is estimated to account for a turnover of Rs 15,000 crores, and its linkages are extensive and highly employment-creating. It involves manufacture (and sometimes import) of a wide range of packing material - paper, paperboard, cardboard, a range of polymer products including rigid and flexible packaging material, aluminium foil, tin and good old wood and steel.

Apart from the huge value addition and employment involved in this industry, packaging serves the economy by helping preservation of the quality and lengthening the shelf life of innumerable products - ranging from milk and biscuits, to drugs and medicines, processed and semi-processed foods, fruits and vegetables, edible oils, electronic goods etc,

Heightened competition in all product sectors within the country and the increasing need to look for export markets is contributing to the rising demand for cost-effective, packaging material and technologies.

The World Packaging Organization’s (WPO) slogan, “Better Quality of Life through Better Packaging”, sums up the important place that packaging occupies in a modern economy. Collection, segregation and reuse of synthetic packaging material and observation of regulatory requirements is given importance in order to ensure that public appreciation of this role and the policy-makers’ support to the industry1.

What is Packaging?

Packaging can be defined as a wrapper or a container which is used for a consumer product and serves many purposes including protection and description of the contents, product promotion and theft deterrence. Innovative packaging adds value to the product by adding properties like tamper-proofing, child-proofing, easy-open, easy-store, easy-carry, and non-breakability. The packaging labels are important components of the overall marketing mix and can support advertising claims, establish brand identity, enhance name recognition, and optimize shelf space allocations2.

Packacking can be of many types. The main classification being Rigid Packaging (plastic bottles, glass bottles plastic containers), Flexible Packaging (pouches, sachets, wraps) and Corrugated Packaging (cartons, boxes). In this project report we will be discussing about Flexible Packaging

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and the kind of work done at Uflex Limited which is a major player in flexible packaging industry.

FLEXIBLE PACKAGING

Flexible packaging is a kind of customized, non-rigid packaging - such as flexible packaging bags, flexible packaging pouches and flexible packaging films - that is used to store a product (i.e. food, pharmaceuticals, fasteners, beverages, etc). Bags, envelopes, pouches, sachets, wraps,

etc., made of easily yielding materials such as film, foil, or paper sheeting which, when filled and sealed, acquires pliable shape3.

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Flexible packaging finds its use in packaging food, tea, coffee, spices, chewing tobacco, bakery, confectionary, oils, and in certain other non-food applications such as household detergents, health and personal care, soaps, and shampoos.

Flexible packaging is gaining importance and is preferred over other forms of packaging due to various reasons. It provides good barrier properties against moisture and gases and gives total consumer protection by keeping the product clean and protecting it from pilferage and adulteration. Flexible packaging saves cost in material and in storage and transport as it is light weight and fits closely to the shape of the contents. It provides convenience of handling and disposal after use and gives the option to buy only the required quantity at a time. Flexible packaging helps in brand building by enhancing the brand image, increasing sales and realizing new market opportunities.

UFLEX LIMITED

FLEXIBLE PACKAGING MANUFACTURER

Uflex Group came into existence in 1983 and has grown into one of the biggest multi integrated packaging groups in the world. The group is a multi faceted organization which has backward integrated its operations and in over two decades of its intensive existence, it has bridged all the gaps in its competencies offering complete solutions in the field of Flexible Packaging.

Uflex Limited is a fully backward integrated flexible packaging company, wherein it itself produces machinery, raw materials and other things required to produce a flexible packaging product. The various divisions in terms of backward integration that work in tandem are:

Converting Division - The Converting Division manufactures finished packaging materials i.e Flexible Laminates, carry bags, packaging rolls, and Pouches.

The Film division of UFLEX LTD produces films which are used by converting division, i.e. from the simplest base films to specialized multi-layered and multi-coated films, a wide variety of films are manufactured at Uflex. The main Products in its portfolio are BOPET(Biaxially-oriented polyethylene terephthalate) films, BOPP (Biaxially-Oriented

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Polypropylene) films, CPP(Casting Polypropylene) films and Metallised BOPET, BOPP and CPP Films.

The cylinder manufacturing facility at Uflex is a key initiative in completing the process of complete backward integration. Uflex has the capacity to produce 40,000 printing cylinders annually. It enables Uflex to produce its own Rotogravure cylinders in-house for both its own needs as well as meeting the requirements of its customers both in domestic and international markets.

Uflex specializes in the manufacture of a wide variety of converting machines used for producing the flexible packaging roll/pouches/laminates. The range of converting machines includes Rotogravure Printing Machines (up to 10 color), Lamination Machines, Slitting Machines, Inspection Machines and Doctoring Machines, Holographic machines and Packaging machines.

The chemical division of UFLEX is engaged in the business of production of Rotogravure and Flexographic Liquid, Printing Inks, Laminating Adhesive and PET Chips for use by Flexible Packaging Converter Industry in India and abroad. UFLEX has diversified into Polyester Poly, Shoe Adhesives, Holographic Coatings, UV Coatings, Release Lacquers, Antifreeze Coolants etc.

All the above mentioned divisions are operating at different places around the word. Factories are located at Noida (Uttar Pradesh), Malanpur (Madhya Pradesh), Baddi (Himachal Pradesh), Jammu (Jammu and Kashmir), Chennai (Tamil Nadu) and Silvassa (Dadra and Nagar Haveli). Other places outside India are UAE, Mexico and Egypt.

Uflex is a US $ 800 million company in India, the second largest in its core business in Asia, having integrated production facility from basic raw material to finished products. Uflex group lies in its fully integrated, multi-dollar infrastructure, spread over more than one million sq. mts., comprising:

6 in-house BOPP/PET film plant having an annual capacity of 80,00 metric tone 12 Rotogravure, 8-color printing machine 2 Rotogravure, 10-color printing machine 6 state of art metallisers with annual capacity of 18000 metric tones 13 holography machines In-house Rotogravure cylinder manufacturing capacity of 48000 cylinders per annum Machinery for manufacturing holographic masters State-of-art pouch making machinery

Uflex is a global organization with strategic offices in the United States, Dubai and India and it enjoys a complete view of the flexible packaging industry worldwide. The major clientele of Uflex includes Procter & gamble, Coca Cola, Pepsi Co., Kellogs, Con Agra foods, Britannia, Colgate-Palmolive India limited, Glaxo Smithcline, Nestle, Perfeti, Cadbury, etc.

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It is interesting to know that a Maggi wrapper or a Kurkure wrapper which we just throw off without a thought, goes through a series of well-defined, sophisticated processes when it is made at Uflex.

Marketing Mix strategy adopted by UFLEX LTD :

Product:

Uflex deals in diverse range of flexible packaging laminates, in roll and pouch form, for various kinds of food and non-food products.

The various kind of flexible packaging done in the (Converting Division) at UFLEX is shown below:

FLEXIBLE PACKAGING LAMINATES IN ROLL FORM

FLEXIBLE PACKAGING LAMINATES IN POUCH FOR

Apart from the products in the category of plastic packaging, the company also produces gift wrappers and carry bags made up of bamboo resins. The level of production for these two items is not very high, and they are produced in low volumes as the demand for them is not as

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high as for the flexible packagings. The Converting division manufactures over 25 million pouches per month and generates an annual turnover of over US$ 600 million.

The Various types of flexible packaging pouches produced by uflex are:

1. Center Seal2. Center seal side gusset.3. 3 side seal pouch.4. 2 side seal fold pouch.5. Stand up pouch.(with and without radius) Zipper/Slider.6. Bottom fold pouch.7. 2 side gusset pouch.8. 3 side gusset pouch.9. Spout pouch.

Uflex produces all of these products with high quality material and technology, they have latest machines and a brilliant R&D team which comes up with latest innovation under the brand name Uflex Packaging. Uflex has come up with many green products which are environment friendly and adhere to various regulations related to environment, the products are Green PET films, rPET films etc. they emphasize a lot on sustainability and innovation and hence comes the latest products with high quality yet simple to use.

Competitor’s products : The biggest competitor for Uflex are Amcor flexible and Bemis flexible packaging co. Amcor flexible Co. and Bemis flexible packaging are into packaging of all types, they produce rigid, flexible and corrugated packaging domain, They make pouches, bottles, tetrapack,rolls, glass packing etc but uflex is totally concentrated in flexible packaging, i.e. pouches,rolls or laminates. Also, they cater to various products that require cold seal packing, for chocolates, or butter/cheese. Uflex also does this but it has limited capacity as they do not target segments like chocolate industry or frozen foods a lot.

Price:

Uflex’s flexible packaging products are the cheapest of all the competitors without any compromise in the quality of the product. The reason for this is that Uflex is a fully backward integrated company, and right from the raw material to the machinery to produce final product is developed in their plant itself and hence the cost to produce per unit is very low. Also their warehouses, manufacturing units and agents are located at strategic positions around the globe. They have chosen countries like Egypt, mexico as their bases as they get huge tax benefits from those countries while saving on key costs such as freight, also these places are very close to the target market like Europe, U.S.A. due to all these things, the cost of the products comes out to be very cheap. Uflex believes in strong long term relationships and

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hence does not forces new clients to pay the price as soon as possible, but it gives 90 days of time for them to pay the amount. Loyal customers are given discounts according to their purchase order.The pricing of the product varies a lot depending on the cost of raw materials like pigments etc, and the prices of Oils, as Uflex exports heavily through ships and cargo planes. Fluctuations in the prices of fuels are adjusted accordingly from time to time.

Competitor’s pricing: The competitors like Amcor, Bemis, or Sonoco are not cheaper than uflex products, reason being that they are not vertically integrated like uflex. Due to this, they have to import machineries, raw materials and other things to produce the final product. Thus the cost of the product becomes high.

Promotion:

Since Flexible packagings are not meant for end customer, but are provided to the food manufacturers, the promotional strategy is totally different from the conventional methods. Uflex promotes itself by showcasing its products in the various international and national trade fairs and exhibitions organized through out the year. The most important trade fairs are held in Germany, Belgium, USA and Dubai. Apart from this, Uflex also goes for direct marketing, where the prospective clients are searched through various business directories and contacted on personal basis by the sales representatives of the company. Various national and international flexible packaging magazines and online forums and websites are contacted to put ads on their pages. The top managers, from time to time write articles in these magazines and websites and take part in various discussions on these online forums, this way they try and promote their company.

Competitor’s Promotions: The competitors also follow the same methodology to promote themselves as this is a purely industrial marketing.

Place:

Uflex has a great coverage in the domestic market and it can supply the products to any client situated in any state. They don’t have their own logistics but have outsourced it to the local players in different regions in India. The locations where the products are produced or the raw materials are extracted for the production of final products are : Jammu, Noida and Malanpur (U.P). Uflex have mines at Malanpur to extract pigments used in printing and creation of inks and dyes for production. The final product are stored in the Noida division, as it has the largest warehouse for storing the inventory. From here, it is sent to other places. Warehouses are present in jammu and malanpur too, for storing the semifinished product. Uflex follows the

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principle of “Make to Order” and does not store its products for long. It keeps only those products in warehouses that are in the pipeline to be delivered to the customer, or the rejected pieces that have been sent back by the customer.

It has a strong global sales and distribution network in more than 94 countries.Overseas facilities in countries with trade pacts allow for larger market penetration. Uflex primarily has their ware houses, manufacturing units and agencies at locations like Dubai, Mexico and Egypt. For e.g. Mexico is member of NAFTA which is favorable for the company to do business in America, Canada. Egypt gives access to GCC nations. While Dubai gives access to Middle East, West Asia and CIS countries. Agents or distributors are present in almost all the major countries in the world. Warehouses are present in all these countries to store the products.

They have established themselves at Egypt, where the taxation policies and import/export regulations are in favor of the company and the labor is also cheap. From this base, they are able to target countries present in Europe, and Africa. Similarly, they have established their manufacturing and warehouses units in Mexico, so as to cater the market of U.S. and Latin America.

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Uflex has established warehouses to store their goods at places like Germany, France to cater to the European market, as these places are near to every other European country and hence the company can deliver the products in short time. Ware houses at Mexico are used by Turkish and African countries and the ones at Mexico are used by Latin America and U.S markets. The most important reason for establishing their agencies, warehouses and manufacturing units at these places was to reduce the cost of logistics like freight, Lesser lead time etc.

Uflex uses logistics at a very high rate. All the deliveries in India are mostly done by roads, or railways. In India Cargo planes are barely used by them, only in the case of supply to north-eastern regions they use it. While in the case of Exports, they heavily rely on ships and Cargo planes. The logistics is outsourced to third parties, which handle all the commercial dealings.

How Uflex is able to beat the competition:

Vertical Integration:

Uflex is the only fully vertically integrated player with large film manufacturing capacities. All the raw materials required by Uflex in producing a packaging film is sourced from their own divisions producing them. For. E.g. it sources films, inks, adhesives internally. Also, they have their own mines from where the raw pigments are extracted and used for the packaging production. The engineering division of Uflex makes machines and tools of latest technology as per the requirement of the line managers working in the production plant. Uflex does not buy these machines from outside, but makes on their own. Infact, it even sells its machines to other buyers. This way Uflex is able to follow cost minimization. This USP of Uflex is no where present in the competitors. None of the competitor is fully integrated vertically, and hence Uflex plays in the market on cost benefits.

Due to vertical integration, Uflex has: High quality control over final products Timely Delivery Cost Effectiveness Diversification of Product Portfolio.

Strategic expansion:

Uflex has its distribution network in more than 94 countries but it has its manufacturing/Mining/Warehouse/Agencies situated in very strategic locations around the globe. Uflex in order to make its product cheaper than the competitors’ product has located

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itself in countries where it has got max. Tax benefits (Dubai – 0%, Egypt – 20%, Mexico – 30%), and has leveraged on trade treaties in those countries. It has chosen countries where the labor is very cheap, start-up cost is low and the target market is very close. Due to the proximity to the target market by existing in these countries, Uflex saves costs such as freight, and the buyer is spared from spending extra money. It has bases in Mexico, which gives access to South America, U.S.A and Canada by leveraging on NAFTA agreement. Its base in Dubai helps it to serve to CIS countries, Middle East, west Asia while Egypt helps in covering GCC nations and Africa and southern Europe.

New Product Development:

Consistent new product development in sync with the current market trends, and customer needs gives Uflex an advantage. Uflex is customer oriented, and has come up with some state of the art, technologically advanced, eco friendly products like GreenPET and rPET films, which are renowned worldwide. Uflex always believes n taking feedbacks from the customers and improves the products accordingly. The R&D team of Uflex is one of the best in Asia, and has come up with best packaging products and solutions for its customers.

Since, the other global players use high end technology to produce new products, Uflex takes no chances, and is always in a pursuit to provide customers, products of the same quality. Uflex is the biggest player in flexible package manufacturing, but it has now forayed into organic food packings, baby food packagings and pet food product packings. These three are the niche segment in which Uflex has made a substantial growth and is in a better position.

Cost pass-through helps maintain margins:

The biggest benefit or advantage given by Uflex to its customers is the Cost benefit. Due to full vertical Integration, and low logistic costs etc, Uflex can afford to give good discounts to its customers, and can afford to give the customers good space to breathe in terms of payment modes and duration to pay. Since the cost is not very high, Uflex even after giving discounts, afford to have high margins. Uflex has flexible credit policies.

Apart from this, due to change in raw material prices and Fuel prices, the Price of the product tends to change but these changes are adjusted in the final product with a lag.

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Organizational buying Behavior at Uflex:

Buying situation:

Although Uflex is a full vertically integrated company, and so it makes raw material on its own, but it also buys it form other companies, in case of high demand to be met, or in case of some unwanted situation, like problem in the plant etc. it mainly buys raw pigments from other companies. The vendors for such pigments are: Reliance, Bombay dyeing, Jindal Poly. Also, to extract the pigments they have to use rollers, heavy vehicles and other tools. These are also bought form other vendors. Apart from this, various types of furnaces, burners, blowers are also bought from outside vendors.

The buying situation is a straight rebuy in case of pigments or any other raw material because the pigment used in Uflex for packaging does not vary in specification and type. There are mostly 3-4 types of substrate used for printing like LLDPE, LDPE, m-LDPE. Regular pigments are used to make these substrates. In order to make a varied laminate, the same ordinary pigments are processed at the chemical division of Uflex to make a new variety. So, generally, the purchase is a straight rebuy, with repeat orders. Since, Reliance is the biggest player in petrochemical pigments and has good reputation, Uflex always goes for this company, and does not like to take risk with some other vendor. Modified rebuy is seldom done at Uflex as the material required changes once in a blue moon.

In case of buying machines for extracting the pigments, or for processing the pigments in the chemical division, Uflex searches for potential vendors and asks for the proposals. After discussing the proposals with the management w.r.t cost, after sales service and quality, they choose a vendor and decide an order routine, payment terms etc.

Since Uflex buys pigments in bulk and since the investment in heavy vehicles and machines used for extraction of pigments from mines and for their processing is very high, Uflex gives importance to price, quality and service. Since, Uflex plays its game on cost w.r.t final product, it does not try to acquire machines which are expensive and could have been bought for a very low price.

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EXHIBIT – I

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EXHIBIT – II

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REFERENCES

1 http://www.flexfilm.com/2 http://www.uflexltd.com/ 3 http://xa.yimg.com/kq/groups/8518353/1729295842/name/ Uflex - Almondz . pdf 4 http://www.flexpackmag.com/ 5 http://www.flexpackmag.com/ 6 www.packagingeurope.com 7 www.packworld.com 8 www.convertingmagazine.com 9 http://www.thehindubusinessline.com/catalyst/2010/07/15/stories/2010071550020100.htm 10 www. uflex ltd.com/Annual_Reports/ar032008.pdf 11 http://www.indiainfoline.com/Markets/Company/Fundamentals/Management-Discussions/Uflex-

Ltd/500148

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